Commercial real estate brokers’ underperformance suggests ‘damage has been done’, analyst says

Stocks of commercial real estate brokers have underperformed the real estate investment trust (REIT) and the broader stock market this year, and they could remain “shaky” in the coming months, but JPMorgan analyst Anthony Paolone , said that “a lot of the damage seems to be done.” Shares of CBRE Group Inc. CBRE,
fell 29.7% since the start of the year, Cushman & Wakefield PLC CWK,
fell 30.9% and Jones Lang LaSalle Inc. JLL,
fell 34.4%, while the SPDR Real Estate Select Sector ETF XLRE,
fell 19.7% and the S&P 500 SPX,
lost 18.3%. Paolone said CRE brokers have been hit as rising interest rates have dampened capital market activity, particularly the sale of CRE assets, as have year-on-year financial comparisons. other are becoming increasingly difficult and amid growing signs of re-negotiation of deals. However, he said this year’s stock declines are already “pretty well explained” by those concerns. So for investors who can handle some short-term volatility, he said the CRE services sector is “attractive,” with “very strong” balance sheets, and should reward investors. “We continue to believe that the market share opportunity and increased industry diversification for the industry’s largest companies are secular tailwinds that should drive growth,” Paolone wrote in a note to clients.